[Federal Register Volume 64, Number 127 (Friday, July 2, 1999)]
[Proposed Rules]
[Pages 36216-36219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16846]
[[Page 36215]]
_______________________________________________________________________
Part VI
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 200
Single Family Mortgage Insurance; Appraiser Roster Placement and
Removal Procedures; Proposed Rule
Federal Register / Vol. 64, No. 127 / Friday, July 2, 1999 / Proposed
Rules
[[Page 36216]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 200
[Docket No. FR-4429-P-01]
RIN 2502-AH29
Single Family Mortgage Insurance; Appraiser Roster Placement and
Removal Procedures
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would implement one aspect of HUD's
Homebuyer Protection Plan, which was launched on June 1, 1998. The
Homebuyer Protection Plan consists, in part, of a number of reforms to
the appraisal process for the purchase of single family properties
financed with mortgages insured by the Federal Housing Administration
(FHA) and certain manufactured homes under the FHA Title I program.
This proposed rule would establish an independent removal procedure for
HUD's Appraiser Roster. The Appraiser Roster lists appraisers who are
eligible to perform FHA single family appraisals. This proposed rule
would also codify the current placement procedure for the Appraiser
Roster.
DATES: Comments Due Date: August 2, 1999.
ADDRESSES: Submit your comments about this proposed rule to the Office
of the General Counsel, Rules Docket Clerk, Room 10276, U.S. Department
of Housing and Urban Development, 451 Seventh Street, SW, Washington,
DC 20410-0500. Your comments should refer to the above docket number
and title. We do not accept facsimile (FAX) comments. A copy of each
comment submitted will be available for public inspection and copying
during regular business hours (7:30 a.m. to 5:30 p.m.) at the above
address.
FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Home
Mortgage Insurance Division, Office of Insured Single Family Housing,
Room 9266, U.S. Department of Housing and Urban Development, 451
Seventh Street, SW, Washington, DC 20410-8000; telephone (202) 708-2700
(this is not a toll-free number). Hearing or speech-impaired
individuals may access this number via TTY by calling the toll-free
Federal Information Relay Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
a. HUD's Homebuyer Protection Plan
HUD launched the Homebuyer Protection Plan (the Plan) on June 1,
1998. Among other innovations, the Plan reforms the appraisal process
for the purchase of single family properties financed with mortgages
insured by the Federal Housing Administration (FHA) and certain
manufactured homes under the FHA Title I program. One aspect of the
appraisal process that is undergoing reform is HUD's Appraiser Roster.
The Appraiser Roster lists appraisers who are eligible to perform FHA
single family appraisals. Lenders must select an appraiser from this
list for property appraisals involving the FHA single family mortgage
insurance program. HUD maintains the Appraiser Roster because the
success of the single family mortgage insurance program and HUD's
ability to protect its financial interests begin with selecting
qualified and knowledgeable appraisers.1
---------------------------------------------------------------------------
\1\ In the future, HUD plans that the Appraiser Roster will be
administered by HUD's Real Estate Assessment Center.
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b. Appraiser Roster Reforms
The Appraiser Roster reforms that would be implemented by the
Homebuyer Protection Plan protect homebuyers by ensuring accurate and
complete appraisals of homes purchased through the FHA single family
insurance program. An accurate and complete appraisal protects
homebuyers by informing them, before they complete the purchase of a
home, about any extensive repairs that may be needed to make the home
habitable. It is important to note, however, that while HUD is
committed to protecting homebuyers, the purpose of an FHA property
appraisal is to determine the maximum insurable mortgage and to protect
the FHA insurance funds. Consequently, the inclusion of an appraiser on
the Appraiser Roster does not create or imply a warranty or endorsement
to the prospective homebuyer or to any other organization or individual
by HUD of the listed appraiser nor does it represent a warranty of the
appraisal performed by the listed appraiser. The inclusion of an
appraiser on the Appraiser Roster means only that a listed appraiser
has met the qualifications and conditions, prescribed by the Secretary,
for placement on the Appraiser Roster.
c. Placement Procedure
This proposed rule would codify in regulations the requirements for
placement on the Appraiser Roster. These requirements are currently in
place. This rule would merely codify existing practice. To be eligible
for placement on the Appraiser Roster, an appraiser must be state-
certified or state-licensed and must not be listed on either the
General Services Administration's Suspension and Debarment List, HUD's
Limited Denial of Participation List, or HUD's Credit Alert Interactive
Voice Response System. In addition, the appraiser must also pass a HUD
test on FHA appraisal methods and reporting.
To apply for placement on the Appraiser Roster, the appraiser must
submit an application to HUD. To verify that the appraiser is eligible
to perform HUD/FHA appraisals, HUD performs a detailed review of the
appraiser's professional qualifications and checks for any negative
information. If HUD's review of an appraiser's application demonstrates
that the appraiser is qualified to be listed on the Roster, the
appraiser is placed on the Roster. Appraisers that are listed on the
Appraiser Roster are responsible for obtaining and complying with the
HUD Appraiser Handbook (4150.2) (and any updates to the handbook) and
all other instructions and standards issued by HUD.
d. Removal Procedure
An appraiser who is eligible to perform HUD/FHA appraisals is hired
by the lender and, therefore, has a contractual responsibility to that
lender. However, the appraiser also provides services for HUD programs
and, therefore, the appraiser also has an obligation to perform
appraisal services that meet HUD's standards and requirements. This
dual responsibility of the appraiser is recognized in HUD's review and
reporting requirements. The lender and appraiser must meet their
respective obligations as prescribed by HUD. Failure to comply with
appraiser obligations merits removal from the Appraiser Roster.
This proposed rule would establish an independent procedure by
which an appraiser listed on HUD's Appraiser Roster may be removed from
the Roster. HUD is proposing this independent removal procedure, in
addition to HUD's existing debarment, suspension, and limited denial of
participation remedies, in order to better safeguard the FHA insurance
funds and to better protect homebuyers. The removal procedure would
provide a less lengthy process that would be specifically targeted
towards the Appraiser Roster and would fully protect appraisers' due
process rights.
[[Page 36217]]
It should be noted that HUD had previously issued regulations that
governed appraiser removal from the Roster at 24 CFR 267.8(d)(3). These
regulations were revised during HUD's regulation streamlining in 1996.
HUD had intended to retain a less formal procedure for removal from the
Roster, but the procedure was not issued during the streamlining. This
proposed rule would reinstate this less formal procedure. The procedure
included in this proposed rule, however, would provide greater
protection for appraisers than the procedure previously located at 24
CFR 267.8(d)(3).
This proposed rule would amend HUD's regulations at 24 CFR part 200
(entitled ``Introduction to FHA Programs'') to add a new subpart G
(entitled ``Appraiser Roster; Placement and Removal Procedures'')
covering the placement and removal of appraisers from the Roster.
Subpart G (which would consist entirely of new Sec. 200.200, entitled
``Appraiser Roster; placement and removal procedures'') would allow HUD
to remove an appraiser from the Roster at any time for cause. Cause
would include, but would not be limited to:
--Significant deficiencies in appraisals;
--Failing to maintain standing as a state-certified or state-licensed
appraiser;
--Prosecution for committing, attempting to commit, or conspiring to
commit fraud, misrepresentation, or any other offense that may reflect
on the appraiser's character or integrity;
--Failing to perform appraisal functions in accordance with
instructions and standards issued by HUD;
--Failing to comply with any agreement made between the appraiser and
HUD or with any certification made by the appraiser;
--Being issued a final debarment, suspension, or limited denial of
participation;
--Failure to maintain eligibility requirements for placement on the
Appraiser Roster as described in new Sec. 200.200 or any other
instructions or standards issued by HUD; or
--Failure to comply with HUD-imposed education sanctions within the
specified period for complying with such education sanctions.
The removal procedure proposed by this rule would be an independent
removal procedure. The removal procedure would apply only to removal
actions taken under Sec. 200.200. The procedure would not apply in any
way to removal actions taken under any other authority available to
HUD, nor would the procedure set forth in Sec. 200.200(d)(2) (entitled
``Procedure for removal'') be available to appraisers in debarment,
suspension, or limited denial of participation actions. Furthermore,
the proposed rule would require the automatic removal from the
Appraiser Roster of an appraiser, if the appraiser has been issued a
final debarment, suspension, or limited denial of participation. Under
these circumstances, the procedure set forth in Sec. 200.200(d)(2)
would not be applicable.
Except in the above case, the removal procedure proposed by this
rule would require HUD to give an appraiser written notice of a
proposed decision to remove the appraiser from the Roster. This notice
would include the reasons for the removal and the duration of the
removal. The appraiser would then be given 20 days from the date of the
removal notice to submit a written response. During this period, the
appraiser would also have the right to request a conference. Requests
for a conference would have to be in writing and submitted along with a
written response.
Within 30 days of receiving a written response, or if the appraiser
requests a conference, within 30 days of the completion of the
conference, a HUD official, designated by the Secretary, would review
the appraiser's appeal and send the appraiser a final decision either
affirming, modifying, or cancelling the removal from the Appraiser
Roster. The HUD official designated by the Secretary to review the
appraiser's appeal would not be someone involved in HUD's initial
removal decision nor would it be someone who reports to a person
involved in that initial decision.
If the appraiser does not submit a written response within 20 days,
the removal would become effective 20 days after the date of HUD's
initial removal notice. If the appraiser submits a written response,
and the removal decision is affirmed or modified, the removal would
become effective on the date of HUD's notice affirming or modifying its
initial removal decision.
The proposed addition of Sec. 200.200 would not prohibit HUD from
debarring, suspending, issuing a limited denial of participation,
seeking a false claims action, taking such other action against an
appraiser as provided for in 24 CFR part 24 (entitled ``Government
Debarment and Suspension and Governmentwide Requirements for Drug-Free
Workplace (Grants)''), or from seeking any other remedy against an
appraiser available to HUD by statute or otherwise. In some cases,
where there is evidence that an appraiser is deficient in FHA appraisal
requirements, HUD may require an appraiser to undergo professional
training and retake the HUD test on FHA appraisal methods and
reporting.
With respect to removing an appraiser from the Appraiser Roster, or
taking other appropriate enforcement action against an appraiser, HUD
is cognizant that section 222 of the Small Business Regulatory
Enforcement Fairness Act of 1996 (Public Law 104-121, 110 Stat.
847)(''SBREFA'') requires the Small Business and Agriculture Regulatory
Enforcement Ombudsman to ``work with each agency with regulatory
authority over small businesses to ensure that small business concerns
that receive or are subject to an audit, on-site inspection, compliance
assistance effort or other enforcement related communication or contact
by agency personnel are provided with a means to comment on the
enforcement activity conducted by this personnel.'' To implement this
statutory provision, the Small Business Administration has requested
that agencies include the following language on agency publications and
notices that are provided to small businesses concerns at the time the
enforcement action is undertaken. The language is as follows:
Your Comments Are Important
The Small Business and Agriculture Regulatory Enforcement
Ombudsman and 10 Regional Fairness Boards were established to
receive comments from small businesses about federal agency
enforcement actions. The Ombudsman will annually evaluate the
enforcement activities and rate each agency's responsiveness to
small business. If you wish to comment on the enforcement actions of
[insert agency name], call 1-888-REG-FAIR (1-888-734-3247).
As HUD stated in its notice describing HUD's actions on the
implementation of SBREFA, which was published on May 21, 1998 (63 FR
28214), HUD intends to work with the Small Business Administration to
provide small entities with information on the Fairness Boards and
National Ombudsman program, at the time enforcement actions are taken,
to ensure that small entities have the full means to comment on the
enforcement activity conducted by HUD.
II. Justification for 30-Day Public Comment Period
In accordance with HUD's regulations concerning rulemaking at 24
CFR part 10 (entitled ``Rulemaking: Policy and Procedures''), it is
HUD's policy that the public comment period for notices of proposed
rulemaking should be 60 days. In the case of this proposed rule,
[[Page 36218]]
however, we have determined that there is good cause to reduce the
public comment period to 30 days.
This proposed rule would implement part of the Homebuyer Protection
Plan, which was launched on June 1, 1998. This Plan reforms FHA's
single family home appraisal process and will benefit 800,000 families
who obtain FHA-insured mortgage financing each year. One goal of the
Plan is to provide these families with the best protection against bad
appraisals ever available in the public or private sector.
In light of this important goal, HUD has previously made the public
and members of affected industries, including appraisers, aware of the
reforms outlined in the Homebuyer Protection Plan. For example, we
provided, through HUD Press Release No. 98-206, a thorough overview of
the Homebuyer Protection Plan on June 1, 1998. We also met routinely
with industry representatives to discuss the details of the Plan and to
seek comment and opinion regarding the Plan. While these meetings were
held for discussion purposes only, and were not held to reach agreement
on HUD policy, they served to make a significant number of affected
parties aware of the changes HUD is proposing.
Finally, HUD has made a handbook available that describes the Plan
in detail. This handbook has been widely available through the HUD Web
Page (http://www.hud.gov/reac/reasfappr.html). Through these means, HUD
has alerted appraisers of the changes that would be brought about by
the Homebuyer Protection Plan, including the processes by which
appraisers may be removed from HUD's Appraiser Roster.
Given the broad exposure of the reforms contained in the Homebuyer
Protection Plan, and considering the importance of the Plan's efficient
implementation, HUD has determined that a 30-day comment period for
this proposed rule should provide sufficient notice and opportunity for
interested parties to comment.
III. Findings and Certifications
Paperwork Reduction Act Statement
The information collection requirements contained in this rule have
been submitted to the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and are pending OMB
approval. The information collection requirements were previously
published for comment in a separate notice in the Federal Register on
May 26, 1999 (64 FR 28502). An agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless the collection displays a valid control number.
Environmental Impact
This proposed rule would establish placement and removal procedures
for HUD's Appraiser Roster. Accordingly, under 24 CFR 50.19(c)(1), this
proposed rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 (Pub. L. 91-190, 83 Stat.
852, codified as amended at 42 U.S.C. 4321-4347).
Regulatory Flexibility Act
The Secretary has reviewed this proposed rule before publication,
and by approving it certifies, in accordance with the Regulatory
Flexibility Act (5 U.S.C. 605(b)), that this proposed rule would not
have a significant economic impact on a substantial number of small
entities. The proposed rule would establish the procedure by which an
appraiser, who has violated FHA single family mortgage insurance
program requirements, may be removed from HUD's Appraiser Roster.
Accordingly, to the extent that this proposed rule would impact small
entities it will be as a result of actions taken by small entities
themselves--that is, violation of single family program regulations and
requirements.
Generally, HUD expects that the number of removal proceedings
initiated under this proposed rule would be relatively low. For
example, in fiscal year 1998, of the over 30,000 appraisers listed on
the Appraiser Roster, HUD initiated enforcement proceedings against
only 36 appraisers (most of these enforcement proceedings were Limited
Denial of Participation proceedings).
Further, the proposed rule would provide several procedural
safeguards designed to minimize any potential impact on small entities.
For example, the rule grants appraisers, selected for removal from the
Appraiser Roster, with the opportunity to provide a written response
and to request a conference regarding a proposed removal. The rule also
specifies that the official designated by HUD to review an appeal may
not be the same HUD official involved in the initial removal decision.
While HUD has determined that this rule would not have a
significant economic impact on a substantial number of small entities,
HUD welcomes any comments regarding alternatives to this rule that
would meet HUD's objectives, as described in this preamble, and would
be less burdensome to small entities.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4, 109 Stat. 48, 64, codified at 2 U.S.C. 1531-1538) (UMRA) requires
Federal agencies to assess the effects of their regulatory actions on
State, local, and tribal governments and on the private sector. This
proposed rule does not impose, within the meaning of the UMRA, any
Federal mandates on any State, local, or tribal governments or on the
private sector.
Federalism Impact
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612 (entitled ``Federalism''), has determined that
the policies contained in this rule will not have substantial direct
effects on States or their political subdivisions, on the relationship
between the Federal Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
List of Subjects in 24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Home improvement, Housing standards,
Incorporation by reference, Lead poisoning, Loan programs--housing and
community development, Minimum property standards, Mortgage insurance,
Organization and functions (Government agencies), Penalties, Reporting
and recordkeeping requirements, Social security, Unemployment
compensation, Wages.
For the reasons stated in the preamble, HUD proposes to amend 24
part 200 as follows:
PART 200--INTRODUCTION TO FHA PROGRAMS
1. The authority citation for part 200 continues to read as
follows:
Authority: 12 U.S.C. 1701-1715z-18; 42 U.S.C. 3535(d).
2. Add subpart G, consisting of Sec. 200.200, to read as follows:
[[Page 36219]]
Subpart G--Appraiser Roster; Placement and Removal Procedures
Sec.
200.200 Appraiser Roster; placement and removal procedures.
Subpart G--Appraiser Roster; Placement and Removal Procedures
Sec. 200.200 Appraiser Roster; placement and removal procedures.
(a) Appraiser Roster. HUD maintains a roster of appraisers, and a
mortgagee must select an appraiser from this list for the appraisal of
properties involving the FHA single family mortgage insurance program.
(b) Disclaimer. Since an appraisal is performed to determine the
maximum insurable mortgage and to protect the FHA insurance funds, the
inclusion of an appraiser on the Appraiser Roster does not create or
imply a warranty or endorsement to a prospective homebuyer or to any
other organization or individual by HUD of the listed appraiser nor
does it represent a warranty of any appraisal performed by the listed
appraiser. The inclusion of an appraiser on the Appraiser Roster means
only that a listed appraiser has met the qualifications and conditions,
prescribed by the Secretary, for inclusion on the Appraiser Roster.
(c) Placement on the Appraiser Roster--(1) Application. To apply
for placement on the Appraiser Roster, you must submit an application
to HUD.
(2) Eligibility. To be eligible for placement on the Appraiser
Roster you must be a state-licensed or state-certified appraiser, pass
a HUD test on FHA appraisal methods and reporting, and you must not be
listed on:
(i) The General Services Administration's Suspension and Debarment
List;
(ii) HUD's Limited Denial of Participation List; or
(iii) HUD's Credit Alert Interactive Voice Response System.
(d) Removal from the Appraiser Roster. HUD officials, as designated
by the Secretary, may at any time remove a listed appraiser from the
Appraiser Roster for cause under the provisions of this section. The
provisions of this section apply only to removal actions taken under
this section. These provisions do not apply to removal actions taken
under any section in 24 CFR part 24 nor to any other remedy against an
appraiser available to HUD by statute or otherwise.
(1) Cause for removal. Cause for removal under the provisions of
this section include, but are not limited to:
(i) Significant deficiencies in appraisals;
(ii) Failure to maintain standing as a state-certified or state-
licensed appraiser;
(iii) Prosecution for committing, attempting to commit, or
conspiring to commit fraud, misrepresentation, or any other offense
that may reflect on the appraiser's character or integrity;
(iv) Failure to perform appraisal functions in accordance with
instructions and standards issued by HUD;
(v) Failure to comply with any agreement made between the appraiser
and HUD or with any certification made by the appraiser;
(vi) Being issued a final debarment, suspension, or limited denial
of participation;
(vii) Failure to maintain eligibility requirements for placement on
the Appraiser Roster as set forth under this section or any other
instructions or standards issued by HUD; or
(viii) Failure to comply with HUD-imposed education sanctions
within the specified period for complying with such education
sanctions.
(2) Procedure for removal. If you are a listed appraiser and HUD
decides to remove you for cause from the Appraiser Roster under the
provisions of this section, the following procedure applies to you
unless you have been issued a final debarment, suspension, or limited
denial of participation:
(i) You will be given written notice of your proposed removal. The
notice will include the reasons for your proposed removal and the
duration of your proposed removal.
(ii) You will have 20 days from the date of your notice of proposed
removal to submit a written response appealing the proposed removal and
to request a conference. A request for a conference must be in writing
and must be submitted along with a written response.
(iii) Within 30 days of receiving your written response, or if you
have requested a conference, within 30 days after the completion of
your conference, a HUD official, designated by the Secretary, will
review your appeal and will send you a final decision either affirming,
modifying, or canceling your removal from the Appraiser Roster. HUD may
extend this time upon giving you notice. The HUD official designated by
the Secretary to review your appeal will not be someone involved in
HUD's initial removal decision nor will it be someone who reports to a
person involved in that initial decision.
(iv) If you do not submit a written response, your removal will be
effective 20 days after the date of HUD's initial removal notice. If
you submit a written response, and the removal decision is affirmed or
modified, your removal or modification will be effective on the date of
HUD's notice affirming or modifying the initial removal decision.
(3) Automatic removal for issuance of final debarment, suspension,
or limited denial of participation. If you are a listed appraiser and
you have been issued either a final debarment, suspension, or limited
denial of participation, you will be automatically removed from the
Appraiser Roster. The provisions of this section do not apply to you,
and you may not appeal the removal action under the provisions of this
section.
(e) Compliance with HUD-issued instructions and standards. All
appraisers listed on the Appraiser Roster are responsible for obtaining
and complying with the HUD Appraiser Handbook (4150.2) (and any updates
to the handbook) and all other instructions and standards issued by
HUD. The handbook can be obtained through the HUD Web Page (http://
www.hud.gov/reac/reasfappr.html).
(f) Education sanctions. Where there is evidence that an appraiser
is deficient in FHA appraisal requirements, HUD may require an
appraiser to undergo professional training and retake the HUD test on
FHA appraisal methods and reporting.
(g) Re-application. Appraisers removed from the Roster must re-
apply to HUD in accordance with instructions provided by HUD.
(h) Other action. Nothing in this section prohibits HUD from taking
such other action, against an appraiser, as provided under 24 CFR part
24, or from seeking any other remedy against an appraiser available to
HUD by statute or otherwise.
Dated: June 10, 1999.
William C. Apgar,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 99-16846 Filed 7-1-99; 8:45 am]
BILLING CODE 4210-27-P
